Spain enters 2026 without its own budget for the eighth consecutive year. The General State Budget Law in force is the 2022 edition — in practice a roll-over of the 2018 budget with targeted adjustments — and the Sánchez government has not presented a new budget since parliament rejected the 2019 draft, triggering snap elections. This indefinite budget extension has tangible consequences for businesses and for the Spanish economy, though the real impact differs significantly from what superficial analyses suggest.
What a Budget Roll-Over Actually Means
The automatic extension of budgets, established under Article 134.4 of the Spanish Constitution (Constitución Española), does not mean the State grinds to a halt. Constitutional obligations — pensions, unemployment benefits, civil service salaries, debt service — continue uninterrupted. The real consequences of the roll-over are more specific:
What can be done without a new budget:
- Execute ordinary expenditure lines from the extended budget.
- Manage extraordinary credits via Royal Decree-Laws for urgent and unforeseen spending.
- Deploy EU Recovery and Resilience Plan (PRTR — Plan de Recuperación, Transformación y Resiliencia) funds already committed, which are independent of the national budget.
- Modify IBI property tax rates and other local taxes (local government competence).
What cannot be done without a new budget:
- Open new direct subsidy lines not already included in the extended budget.
- Significantly increase public sector staffing or create new bodies.
- Launch large public works programmes or multi-year contracts exceeding available credits.
- Modify the rates of major state taxes (income tax, corporation tax, VAT) without parliamentary approval — though these can be amended via ordinary legislation.
Tax Revenue and the Reform Horizon
The government has sustained record tax revenue in recent years without needing a new budget: total state revenues in 2024 exceeded €300 billion for the first time, driven by inflation lifting nominal tax bases, strong employment figures boosting social security contributions and income tax receipts, and record tourism activity. Nevertheless, Spain’s structural deficit persists and the European Commission continues to press for fiscal adjustment.
The most probable scenario for 2026 is that the government attempts to pass targeted fiscal measures through ordinary legislation or Royal Decree-Law. The most debated reforms that could materialise include:
Corporation Tax (Impuesto de Sociedades): The government has signalled its intention to raise the minimum effective rate for large companies to 15%, aligning with the OECD/G20 global minimum agreement (Pillar Two, already transposed as EU Directive 2022/2523). For multinational groups with Spanish operations paying below 15% effective rate, the impact could be material. For SMEs taxed at the general 25% rate, the change would be neutral.
New levies on high-net-worth individuals: The temporary Solidarity Tax on Large Fortunes (Impuesto Temporal de Solidaridad de las Grandes Fortunas, ITSGF), introduced by Law 38/2022 as a “temporary” measure, has been extended indefinitely. The debate over its permanence and potential base expansion continues.
Review of corporate tax benefits: Several reports from bodies including the AIReF (Independent Authority for Fiscal Responsibility) and the Bank of Spain have noted that tax expenditures exceed €40 billion annually in foregone revenue, with questionable economic justification for some. The review of Corporation Tax deductions (R&D, internationalisation, small company regime) represents a regulatory risk on the horizon.
Deployment of EU Recovery Funds in 2026
The Recovery and Resilience Plan (PRTR) worth €163 billion for Spain (of which €77.2 billion are direct transfers and the remainder are available loans) is the primary catalyst for public investment in the 2021–2026 period.
Execution was slower than initially projected but accelerated significantly in 2024 and 2025. The most relevant investment streams for businesses in 2026 are concentrated in:
- Digitalisation and AI: CDTI and Red.es calls for business digitalisation, AI and cybersecurity projects, with an estimated remaining allocation exceeding €3 billion through 2026.
- Renewable energy and energy efficiency: the PERTE for Renewable Energies, Renewable Hydrogen and Storage (ERHA) with €16 billion committed.
- Sustainable mobility: the Electric Vehicle PERTE and MOVES III subsidies for business fleet electrification.
- Agri-food and biotechnology: the Agri-food PERTE with investments in farm modernisation and value chain development.
For businesses, the execution of PRTR funds in 2026 represents a significant financing opportunity that partially offsets the reduced procurement activity stemming from the ordinary budget roll-over.
Key Public Expenditure Figures for 2026
Despite the roll-over, the Spanish state will execute estimated consolidated spending of approximately €660–680 billion in 2026 (including Social Security and regional and local administrations), equivalent to roughly 48–49% of GDP. The expenditure lines most relevant to the business community are:
- Public procurement: the public sector remains Spain’s largest purchaser of goods and services, with an active contracts portfolio exceeding €80 billion annually. The Public Sector Procurement Platform (PLACSP) is the most current source of information for businesses identifying tender opportunities.
- Research, Development and Innovation: public R&D expenditure remains at approximately 0.7% of GDP, well below the 3% Lisbon Strategy target. The Corporation Tax R&D deductions under Article 35 of the CIT Law (up to 42% of R&D expenditure as a deduction) remain the most relevant instrument for innovative businesses.
Practical Planning Recommendations for 2026
Budgetary uncertainty should not paralyse business planning. Practical recommendations:
- Capture available PRTR funds before the execution window closes. PERTE calls have strict deadlines and competition for funding is intense.
- Model your tax position under both baseline and reform scenarios: quantify the impact of a 15% minimum effective Corporation Tax rate and the elimination of specific deductions.
- Monitor the public procurement agenda on the PLACSP platform to anticipate tender opportunities in relevant sectors.
- Assess ICO and IGAPE financing access for investment projects, as these resources are independent of new budget approval.
At BMC, our tax and strategy teams analyse the fiscal and economic impact of public policy to help businesses plan with greater certainty. Learn about our tax planning services.
